October 2014

Welcome to McMillan's Canadian Cartel News. Our first couple of posts will provide a general introduction to Canadian cartel legislation, its enforcement and related private actions. Thereafter, we expect to delve into specific points of interest and new developments as they arise. But, first things first.

Canada's anti-cartel laws, which predate those of the Sherman Act by a year, are found in the federal Competition Act. The Act is administered by the Canadian Competition Bureau (Bureau), headed by the Commissioner of Competition (Commissioner). For criminal investigations, the Competition Bureau receives support from the Public Prosecution Service of Canada (PPSC), which is responsible for conducting criminal prosecutions under the Act, including the final decision to lay charges – or not. In practice, the Director of Public Prosecutions (DPP), the head of the PPSC, will only initiate cartel prosecutions based on advice received from the Commissioner, and the two organizations work very closely together. Nevertheless, the PPSC has the final choice as to whether charges are laid – and on how they are resolved.

Section 45(1) of the Act is the central criminal provision that prohibits cartel conduct in Canada. This section makes it an offence for any person, with a competitor of that person with respect to a product, to conspire, agree or arrange to do any of the following:

a) fix, maintain, increase or control the price for the supply of the product;

b) allocate sales, territories, customers or markets for the production or supply of the product; or

c) fix, maintain, control, prevent, lessen or eliminate the production or supply of the product.

This is a change from the Canadian law as it stood a few years ago. Until 2010, Canadian cartel law required proof of "undue" effects. Now, subject to the defense noted below, the specific prohibited agreements between competitors are per se offenses.

A person who agrees with a competitor on any of the above matters is guilty of an indictable offence and liable to imprisonment for a term not exceeding 14 years or to a fine not exceeding $25 million (CDN) or to both. In addition, the conduct gives rise to civil liability – in practice enforced by class actions – and may disqualify those convicted from bidding on government contracts.

Section 45(4) provides a defence where it can be demonstrated that the otherwise illegal agreement with a competitor was "ancillary" to a broader arrangement between the parties which is directly related to, and reasonably necessary for giving effect to, the objective of the broader or separate agreement or arrangement.

In addition to the criminal prohibition, the Act also contains a civil competitor agreement provision in Section 90.1. This targets agreements between competitors beyond the three specifically prohibited cartel matters. This section, known as the civil reviewable practices provision, allows the Bureau to seek prohibition orders that force parties to stop engaging in what the Competition Tribunal (the administrative body in charge of adjudicating non-criminal matters under the Act) determines to be agreements which injure competition. On application by the Commissioner, the Tribunal can prohibit a person from doing anything under an agreement or arrangement or require any person, with the consent of that person and the Commissioner, to take any other action. To make such orders, the Tribunal must find that the agreement or arrangement between two or more competitors prevents, lessens, or is likely to prevent or lessen, competition substantially in a market.

That is the quick primer on Canada's new anti-cartel legislation. Please return in two weeks – or so – for our overview of the Competition Bureau's Immunity and Leniency programs.

by James B. Musgrove and Joshua Chad

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.